Significant appetite from consumers to save more and spend less in 2018

Bank of Ireland Savings and Investments Index shows marked contrast between Attitudes and Environment indices in January

• Saving more and spending less are top New Year resolutions for Irish people
• Savers and investors are unhappy with the amount of money they are putting away, particularly among those under 50
• Over 40% of consumers indicate it will be difficult to live comfortably in retirement

The Bank of Ireland/ESRI Savings and Investments Index remained flat at 102 in January 2018.  Despite the lack of change in the headline index in January, a notable theme was the stark contrast between Irish people’s attitudes towards saving and investment and their view of the saving and investment environment.

Savings Index

The monthly Savings Index remained constant at 103 points in January 2018. The Savings Attitudes Index, which asks people about their saving behaviour and their feelings on the amount they contribute, decreased by 7 index points to 101 in January 2018. The proportion of regular savers dropped to 50% in January versus 53% in December but people also felt more dissatisfied with the amount they were saving. Half of people felt they were saving less than they should in January, up from 45% in December.

In contrast, the Savings Environment Index, which explores households’ views on the environment for savings, increased by 7 index points to 105 in January.

Consumers were also asked about their top New Year financial resolution for 2018, with most respondents (41%) saying they would like to save more money, over one-fifth (23%) aiming to spend less money, 12% to pay off debt and one in ten of consumers aiming to develop a long term plan to meet financial goals.

Investments Index

The monthly Investment Index declined marginally to 100 in January 2018 from 101 in December. As was the case for the Savings Index, the Investment Attitudes Index fell sharply (from 104 to 95) but this was offset by a big increase in the Investment Environment Index (98 to 105).

Nearly one-third (30%) of people were investing regularly in January, down from 34% in December. Similar to the savings attitudes index, Irish people also felt they weren’t investing as much as they’d like in January with 39% feeling they didn’t invest as much as they should.

39% of people felt it was a good time to invest now, the strongest response since the Investment Environment Index began in October. Confidence around investment markets was clearly high in January, probably reflecting increased optimism about the world economy and the strong world stock market performance in the month.

The fall in saving and investment attitudes was probably the most notable move in the January findings. Tighter budgets in the post-Christmas period could have been a factor but such a decline is unusual for savings. Delving deeper, the fact that people don’t believe they are saving or investing enough could be linked to increased uncertainty about their future finances and whether the returns from savings are enough. These broader financial concerns were also reflected in the Retirement Optimism Index.

Interestingly this uncertainty also seemed much more prevalent amongst younger people. For example, 58% of the under 50s felt they weren’t saving enough in January while 47% felt they weren’t investing enough – this compared with 39% and 29% respectively when the question was answered by over 50s.

Retirement Index

The Retirement Optimism Bi-monthly Index decreased to 92 points in January 2018 from 100 in November 2017. A clear picture emerged in January that Irish people are growing more concerned about their level of retirement planning on top of anxieties about whether these plans will actually be sufficient to leave them financially comfortable in the post retirement period.

As with our findings in the Savings and Investment Index, people under 50 appear more pessimistic about their financial prospects in retirement. Here we found that 60% of under 50s felt financially unprepared for retirement – almost double the percentage of over 50s.

Press release

Commenting on the Bank of Ireland Savings and investments Index, Tom McCabe, Bank of Ireland Investment Markets said: “The Bank of Ireland/ESRI Saving and Investment Index was unmoved in January 2018. However the most striking insight was that Irish people felt they weren’t saving or investing enough, a theme also visible in the questions on Retirement planning.

“This could reflect uncertainty about peoples’ future finances and whether they feel the returns from savings are enough to meet their financial objectives, underlining the importance of having a long term financial plan.

“This month we asked people what their top New Year financial resolution for 2018 and only 10% responded that it was to develop such a long term plan. Given the extent to which people felt they should be saving or investing more in January, it’s surprising the response wasn’t much higher.”

About the ESRI/Bank of Ireland Savings and Investments Index:

The Bank of Ireland/ESRI Savings and Investment Index tracks household attitudes towards savings and investment as well as monitoring their perspectives on the current and future savings and investment environment. Understanding savings behaviour provides insight into how households smooth consumption, plan to make big purchases and build up buffers which can be drawn down in times of economic stress. Monitoring household investment patterns gives an understanding of how they are putting their money to work, their financial diversification, and their appetite for risk. The Bank of Ireland/ESRI Savings and Investment Index also provides a Risk Barometer and a Retirement Optimism Index to give insight into household risk taking and retirement planning. These will be presented on alternate months.

The Bank of Ireland Savings and Investment Index is produced monthly from a minimum sample of 800 consumers aged 15 years and above. The ESRI carries out the Savings and Investment Index research to ensure the indices represent a national sample.